Which of the following statements is FALSE?
A)The option delta,Δ,has a natural interpretation: It is the change in the price of the stock given a $1 change in the price of the option.
B)Because a leveraged position in a stock is riskier than the stock itself,this implies that call options on a positive beta stock are more risky than the underlying stock and therefore have higher returns and higher betas.
C)Only one parameter input for the Black-Scholes formula,the volatility of the stock price,is not observable directly.
D)Because a stock's volatility is much easier to measure (and forecast)than its expected return,the Black-Scholes formula can be very precise.

Question

Quizplus · Accepted Answer

The Answer of Which of the following statements is FALSE?
A)The option delta,Δ,has a natural interpretation: It is the change in the price of the stock given a $1 change in the price of the option.
B)Because a leveraged position in a stock is riskier than the stock itself,this implies that call options on a positive beta stock are more risky than the underlying stock and therefore have higher returns and higher betas.
C)Only one parameter input for the Black-Scholes formula,the volatility of the stock price,is not observable directly.
D)Because a stock's volatility is much easier to measure (and forecast)than its expected return,the Black-Scholes formula can be very precise.

Which of the Following Statements Is FALSE